How do I "research" a real estate market?
January 24, 2013 10:30 AM   Subscribe

I am looking to perhaps purchase a condo in Toronto. What are some objective data sources or opinions to determine whether its a good time to enter the real estate market?

Given that there seem to be more cranes and development projects here than anywhere else in North America, I’m concerned that perhaps now is not the best time to buy. News stories here and there mention a "glut of condos," and "the bubble is going burst" and "housing prices cooling".

On the other hand, I have the disposable income for a sizeable down payment and it seems silly to keep tossing away money on rent and maybe it will never feel like the "right time."

I'm wary of being swayed by herd mentality and people with obvious biases (i.e. real estate agent, mortgage planner).
posted by cacofonie to Work & Money (6 answers total) 9 users marked this as a favorite
Nobody really knows whether it's, in general, a good time to buy (otherwise there would never be things like housing bubbles). I think the best you can do is watch the market for a few months. Follow listings that interest you, see how long they take to sell, and how much they sell for in relation to their original asking prices, and try and make an educated guess about how long it will take you to find a house you like and how much it will actually cost to purchase. Compare that to your income and see if it seems affordable. You have no way to know what might happen to the national or global economy in 5 or 10 years, so you're better off looking at things you can actually see now.
posted by tylerkaraszewski at 10:36 AM on January 24, 2013

First of all, don't think about entering into the housing market as an investment, or with the idea of preserving capital.

Buy a place because you love it, it's a price you can afford, and because you plan on living in it for at least 7 years.

Renters don't "toss away" money, they get the use of a place for the price of that money.

Renting is a great thing. You have freedom and flexibility, you can expand or contract with your needs.

Owning is permanant, insofar as what happens with the place is for you to worry about.

Renters don't worry about big ticket items like HVAC or the roof, if something breaks, they call a guy.

Seriously, if you see yourself in the next decade changing your maritial status, starting a family, or anything that would require you to change houses, buying may not be for you.

Condo associations also charge fees, sometimes very high fees for services. So in addition to the mortgage, and having all of your capital tied up in the property, you'll be obligated to pay those homeowners fees. And if you get assessed for something, that's cash you need to pony up right then and there, because you own it, and because they say so.

You can afford to own when you can pay 20% for a down-payment, 10% for closing costs AND you have an emergency fund of 6 months of expenses.

After that it's about southern exposure and schools.
posted by Ruthless Bunny at 10:42 AM on January 24, 2013 [1 favorite]

It may be radical for some people's tastes, but take a peek at Garth Turner's blog 'The Greater Fool'. He writes a fair amount on the Toronto market. Some of what he says may not jive for you, but it may help you make a more informed decision.
posted by sassy mae at 11:27 AM on January 24, 2013

The Toronto condo market is definitely cooling off, but no one knows how much or for how long. Do not buy a condo as an investment. Anecdotally, I have heard of people having trouble selling their condos.

Consider that with a condo, you will continue to toss away money on condo fees, in addition to the mortgage (on which you will be building equity).

Housing prices in Toronto have something going for them that condos don't: limited supply. No one's building new houses in Toronto; everyone is building new condos. There are more condo towers going up in Toronto than in any other city in the world. A lot of that demand is being driven by foreign investors, who then rent them out.

That doesn't mean you shouldn't buy a condo, but don't be talked into it by someone who wants to sell you their services.

If you do buy a condo, try to buy in a good location, and in a good building, so that you have more going for you when you want to sell than just the overall market.
posted by Dasein at 11:29 AM on January 24, 2013 [1 favorite]

Regarding the "throwing your money away on rent" idea, there are tools available to calculate exactly that sort of comparison. The NYT has a handy one -- Is It Better to Buy or Rent? -- complete with graphics.

When using those sorts of tools, however, bear in mind that in Canada the typical mortgage term is just 5 years, after which you are expected to renegotiate at whatever the going rate is. So while mortgage rates may be at or under 5% now, plan on that to change in the future, and perhaps not in your favour.
posted by scribblative at 2:06 PM on January 24, 2013

Interest rates are low and prices are low. So that's good. But I wouldn't plan on making any making any money. In other words, dont go into it with the idea that you can buy low and make a profit in 5 years. Also, with condos, there's a lot of extra stuff to think about. How many units in the association? Less units = less money in the common account and less people to split major costs with. What's the occupany rate? Low occupancy means you could have a really hard time selling. It also means that the association isn't collecting all of its condo dues, which may mean that the maintenance of the property won't be up to snuff. Ditto if there are are foreclosures/short sales in the building. Are they all owner occupied? Or mostly renters? In my experience, it's harder to get financing for a unit in an association with a lot of rental properties.

Make sure you read the condo restrictions closely. Sometimes there's some crazy stuff buried in there (we had to fight to get a satellite dish installed). Find out how much money the association has. You don't want to get there and find out that it has $300 in reserves. Check if there are any big upcoming projections. Surprise! - 20k assessment per unit for a new roof. Talk with the property manager and the condo board. Make sure they aren't crazy. I'd do my research with the local court to see if the board or property manager had been involved in any litigation. Condos aren't like homes -- you are basically buying property with a lot of people you don't know. Think long and hard about it.
posted by murfed13 at 7:29 PM on January 24, 2013 [1 favorite]

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